Sign up now for FREE unlimited access to Reuters.comSign up LONDON, Sept 21 (Reuters) – Earlier this year, markets were complacent as Russia massed troops on the border with Ukraine. Now, they are once again largely denying Vladimir Putin’s message that he could be ready to use nuclear weapons. Global stocks took an early hit to risk on Wednesday after Putin mobilized more troops to Ukraine and threatened to use Russia’s entire arsenal against what he called Western “nuclear blackmail” for war there. read more It was Russia’s first such mobilization since World War II and marked a major escalation in the war, now in its seventh month. read more Sign up now for FREE unlimited access to Reuters.comSign up And while safe-haven assets such as the dollar, which hit a two-decade high against other major currencies, and government bonds in Germany and the United States rallied, stock markets didn’t appear too rattled. European stocks were earlier off gains and mostly higher (.STOXX), while the main indexes on Wall Street — already bracing for another aggressive U.S. rate hike later in the day — opened higher on Wednesday. “In January and February, when Russian troops were mobilized, market participants misinterpreted this as a bluff to increase Putin’s negotiating leverage, but then Putin exceeded expectations by proceeding with a full-scale invasion of Ukraine,” said Tina Fordham, an independent geopolitical strategist and founder of Fordham Global Foresight. “The most important aspect of what the markets are not pricing in right now is the possibility for Russia to use an unconventional weapon, meaning a tactical chemical or nuclear weapon,” he added, noting that Putin had made some threatening remarks about “blowing wind”. Fordham said that while Putin would likely stop short of a full-scale unconventional attack, it was very much in his “book” to cause maximum instability. The cost of war The MSCI World Index is down 21% this year and the Europe STOXX 600 has lost 16% — both poised for their worst year since 2008, when the global financial crisis unfolded. Russia’s invasion of Ukraine, initially seen as an extreme event, has dealt a further blow to global markets still adjusting to a decades-long period of high inflation and a sharp rise in borrowing costs from the likes of the Federal Reserve and the European Central Bank . . Europe in particular has suffered as Russia has choked off natural gas supplies, sending energy prices soaring, squeezing consumers and companies and raising the risk of a recession. Germany and Italy’s dependence on Russia has made their stock markets among the world’s worst performers this year. Those close to the fighting, including Poland and Hungary, have also seen their local markets collapse. Investors have also lost bonds of countries with high gas or wheat import bills. Stock markets were hit hardest by the Russia-Ukraine war Chris Weafer, chief executive of Macro-Advisory, a consultancy that advises companies on doing business in Russia, said Moscow was preparing for a long conflict, including the continued curtailment of energy supplies, and could better withstand the conflict. from Europe. “There was a feeling in Europe that Russia would seek a compromise. Today’s announcement makes it clear that this is wrong,” he said. “Russia has been digging in for a long time. They are ready to tough it out.” Arne Petimezas, senior analyst at AFS Group in the Netherlands, said Putin is being underestimated. “He’s escalated every time. It’s life and death for him. I don’t see why his next move would be to de-escalate if he doesn’t win,” Petimezas said. Sign up now for FREE unlimited access to Reuters.comSign up Additional reporting by Yoruk Bahceli in Amsterdam and Marc Jones in London Editing by William Maclean Our Standards: The Thomson Reuters Trust Principles.
